Now, in an update on its work, the data watchdog said it believes Google’s policies are not in line with UK law and should be updated.

“We have today written to Google to confirm our findings relating to the update of the company’s privacy policy,” an ICO spokesperson said in a statement. “In our letter we confirm that its updated privacy policy raises serious questions about its compliance with the UK Data Protection Act.”

However, in response, Google issued a vague statement claiming it does adhere to UK laws, but it made no direct comment about the ICO's letter or its contents, or an intention to make any changes.

The statement said: “Our privacy policy respects European law and allows us to create simpler, more effective services. We have engaged fully with the authorities involved throughout this process, and we’ll continue to do so going forward."

The ICO said that its main issues with Google's changes related to the clarity of the policies in place.

“In particular, we believe that the updated policy does not provide sufficient information to enable UK users of Google’s services to understand how their data will be used across all of the company’s products,” they said.

As a result, it must update the policies or face a potential fine from the watchdog. “Google must now amend their privacy policy to make it more informative for individual service users,” the ICO said.

“Failure to take the necessary action to improve the policy's compliance with the Data Protection Act by 20 September will leave the company open to the possibility of formal enforcement action.”

While the ICO's stance is likely to be welcome by privacy campaigners and shows the regulator baring its teeth, the threat of a £500,000 fine is unlikely to have executives at the firm worried, although the reputational damage from such an outcome could be more of an issue.

Chris Watson, head of Communication, Media and Technology at law firm CMS underlined this point by saying the breadth of Google's offerings and reach into all markets made it hard for regulators to keep the company in check.

“Google's business model and multi-faceted strategy means that its power is spread across several pillars," he said.

"This will make it difficult for the ICO, and indeed the European Commission, to find an appropriate remedy that will act as a deterrent. Fining alone is not enough, there will have to be a mixture of fines and prohibitions."

Dan Worth is the news editor for V3 having first joined the site as a reporter in November 2009. He specialises in a raft of areas including fixed and mobile telecoms, data protection, social media and government IT. Before joining V3 Dan covered communications technology, data handling and resilience in the emergency services sector on the BAPCO Journal.